In another sign of the intent to develop Shanghai as an international financial centre, the People’s Bank of China says it has set up an interbank clearing house in the city. These handle wholesale payments for financial institutions. London, New York and Hong Kong all have them, both government- and privately run. They are pretty much basic financial plumbing for any centre with global ambitions. Up till now, the central bank has run China’s payment systems centrally from Beijing with local clearing houses in provincial cities connected through the Electronic Interbank System. (The big four state-owned banks operate and use their own Electronic Funds Transfer System). The central bank has now effectively upgraded the local Shanghai clearing house to equivalent status to Beijing. This Bystander’s understanding is that Shanghai will eventually assume the role of the principle national payments and settlement system from Beijing, and perhaps follow the Hong Kong ownership model, which is a joint venture between the Hong Kong Monetary Authority and the Hong Kong Association of Banks. It is also likely that other clearing houses will meanwhile be allowed to be set up in Shanghai by banks and other financial institutions, with foreign-currency clearing high on the priority list.
Monthly Archives: November 2009
If the U.N.’s Copenhagen Climate Summit does only one thing, it will have been to get China to commit to its first firm target to curb greenhouse gas emissions. Unfortunately, the goal that Prime Minister Wen Jiabao will take to Copenhagen doesn’t amount to much — to achieve by 2020 a 40%-50% cut in the 2005 levels of the amount of carbon dioxide emitted for each unit of GDP produced.
Carbon intensity goals are open-ended in as much as the volume of greenhouse gas emissions is a function of growth and energy efficiency. Beijing plans to have more of both, so its total emissions will likely rise. Also the goal is in line with what is already happening in China after a five-year drive to become more energy efficient. It is already almost half way to hitting it.
That is not to say that any target isn’t welcome; it certainly is to the organizers of the flagging Copenhagen conference, who in the past 48 hours have now got the world’s two biggest polluting nations, the U.S. and China, to agree to at least nominal targets. China’s announcement is also a shot in the arm for carbon trading markets, another area where Beijing thinks it can steal a march over Washington.
New rules on individual’s foreign currency transfers have been announced. The State Administration of Foreign Exchange says any person or organization outside China cannot send foreign currency to more than four Chinese individuals on a single day or consecutive days. Receiving foreign exchange from more than four people considered to be near kin. The new rules are intended to close loopholes that let individuals bypass the limit of $20,000 on the amount of foreign exchange residents can buy by using the accounts of relatives and friends. The hope is that it will help cut the flow of hot money coming into the country in pursuit of rising property prices and in expectation of a yuan appreciation. With domestic liquidity already high, the hot money is just helping inflate bubbles. Will the new rules work? This Bystander guesses not. Residents have proved adept when one hot-money loophole closes at opening another.
The death sentences imposed on two of the 21 people found guilty in connection with last year’s melamine-tainted infant formula scandal have been carried out, Xinhua reports. Cattle farmer Zhang Yujun, who sold more than 770 tonnes of the tainted milk powder from July 2007 to August 2008, and Geng Jinping, who managed a milk production centre, that supplied the now-bankrupt Sanlu Group and other dairies, were convicted in January and had their appeal s heard in March. The other 19 people convicted were given prison sentences, including Tian Wenhua, Sanlu’s chairwoman and the highest ranking executive charged, who received a life sentence.
The tainted formula killed six children and made 300,000 ill. The case caused outrage across the country and hurried forward the imposition of improved food-safety standards and monitoring. Sanlu had been selling the tainted formula for some months after it had discovered it was contaminated. Meanwhile, more than 100 affected families have still not reached compensation settlements with local authorities.
Another deadly day in the world’s deadliest mining industry. At least 42 miners are dead and 66 trapped following an underground gas blast at the state-owned Xinxing colliery in Heilongjiang, 250 miles northeast of Harbin near the Russian border. Xinhua said more than 400 miners on shift had escaped and 29 were in hospital injured, six seriously. The blast occurred 400 metros below the surface at 2.30 a.m., cutting power, ventilation and communication links. Mines have been working flat out to meet additional demand for coal caused by heavy snows in southeastern China. Despite a drive to close small mines, where safety standards are often laxest, in the first nine months of this year, China’s coal mines had 11 serious accidents with 303 deaths — an average of more than one a day.
Update: The death toll has risen to 87 as of Sunday morning, Xinhua reports, making this the deadliest mine accident in nearly two years.
Update: The death toll has risen to 107 as of Wednesday morning, Xinhua reports.
Western China’s economy is growing half as fast again as the economy as a whole. Xinhua reports a 12.5% growth in regional GDP in the first nine months of this year, with retail sales up 19%, also outstripping the national average. This Bystander has been wondering for a while whether there isn’t a slow but certain shift westwards in the country’s economic center of gravity, matching the political expansion of the Han heatland we have noted before (see: “Uighurs, Repression, Assimilation And The Han Islanders).
Beijing has poured 3.5 trillion yuan ($500 billion) in to the vast west since 2000. Much of it has gone into infrastructure: road and rail links both to link the west to the east and, in the opposite direction, to the energy fields of Eurasia; hydropower plants; energy and telecommunications. In part this investment has been to offset the growing income gap between the east coast and the interior that has opened up over the past 20 years, with its attendant risks of social unrest. Cities like Chongqing, Xian, Chengdu and Kunming have prospered on the back of this. They now see themselves the equal of many coastal eastern cities, even if the view doesn’t seem quite the same from the other end of the telescope. Chongqing, now in the process of cleaning up its darker side of its Wild West ways, in particular is emerging as a regional capital with the standing of a first-tier city like Shanghai or Guangzhou.
The slowdown in economic growth overall over the past year, which hit the export producing provinces of the east harder, has also perforce helped narrow the income gap, and sent home migrant workers originally from the west with newly acquired skills and entrepreneurial drive. And there has been little let up in government funds flowing westward. Two fifths of the 1.4 trillion yuan stimulus package has gone to the west with reconstruction following the May 12 Sichuan earthquake accounting for a significant part of that. It has helped sustain a decade-long record of double digit regional GDP growth.
All this has not been without a price. The region’s growing prosperity has drawn increasing numbers of foreign businesses to the region keen to cash in and to take advantage of abundant natural resources, low labor costs, cheap land and low rents (a broad swathe of tax breaks helps, too). But it has also drawn growing numbers of Han Chinese, with the resulting disharmony with local populations in cities such as Urumqi and Lhasa making itself plainly and violently evident this year, and the corruption that has been so blatantly seen in Chongqing.
The extent to which economic power is tilting westwards shouldn’t be overestimated. Even after its decade of double-digit growth, regional GDP at 1.2 trillion yuan accounts for only a fifth of the country’s as a whole, and is still 20% less than Hong Kong’s, so far behind the rest of the country had the west fallen by the start of the century; and historically China has had a tendency to break into three: north, south and west. But perceptible shift there is. And the Beijing-Shanghai-Guangzhou axis of the economy now looks more like Beijing-Shanghai-Guangzhou-Chongqing.
China ranks 79th out of 180 on Transparency International‘s latest annual rankings of how corrupt countries’ public sectors are perceived to be. Its score of 3.6 is equal to Burkino Faso, Swaziland and Trinidad and Tobago. Top ranked New Zealand scored 9.4; bottom-ranked Somalia scored 1.1.
From the commentary on the rankings:
China has launched a sustained anti-corruption drive and intensified a crackdown on corruption in the public sector, investigating and prosecuting ministers, public officials and employees. Corrupt officials above provincial levels were disciplined and preventive measures to deal with stimulus packages to tackle the financial crisis have helped keep China’s score stable in 2009, though still low at 3.6.
The global financial crisis and political transformation in many Asian countries during 2008 exposed fundamental weaknesses in both the financial and political systems and demonstrated the failures in policy, regulations, oversight, and enforcement mechanisms. These two factors contribute to a decrease in the scores of 13 countries from the 32 countries/territories in the region, along with a reduction in the number of countries that scored above 5 in the 2009 Corruption Perceptions Index.
China dropped seven places from its 2008 ranking, when it recorded, as the report noted above, the same score of 3.6. Last year, Bulgaria, Macedonia, Mexico, Peru, Suriname, Trinidad and Tobago were its peers. Pace Trinidad and Tobago, only Mexico failed to improve its score this year.
Hong Kong came in at 12, same as last year, Taiwan at 37 (39 in 2008) and Macao at 43 (no change). China was still ahead of India at 84th (up one from 2008).
In a separate report on private sector corruption, Transparency International notes that both China and India ” boast some of the world’s largest markets and play an increasingly active and important role in global business. However, their companies are regarded by their peers as among the most corrupt when doing business abroad.”
Of the other two Brics, Brazil comes out tops on this year’s public sector perception ranking at 75th with a 3.7. Russia is 146th with a 2.2.
With massive stimulus packages and fast-track disbursements, plundering of pubic funds blocks good governance and accountability.